In recent years cluster policy has become a central component of regional economic development strategy across many European economies. However, concerns are now emerging over the content and quality of some of these initiatives. Given the prevalence of the approach, these apprehensions are non-trivial and have significant implications with regard to the value and contribution of regional economic development. Here we examine the extent to which weaknesses in the theoretical and methodological underpinnings of the cluster approach may have acted in combination with pressures generated by the 'congested state' to produce a number of difficulties. The essay explores the nature, challenges and weaknesses of cluster policy in the context of the demands created by multi-level and multi-actor governance frameworks. We conclude that, irrespective of whether cluster policy is the appropriate choice as an economic development tool in any particular regional or economic circumstance, its selection always necessitates prior consideration of the institutional capacity needed to meet the governance challenges that it creates. Copyright (c) 2008 The Authors. Journal Compilation (c) 2008 Joint Editors and Blackwell Publishing Ltd.

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The paper examines the policy responses in the UK West Midlands to the successive crises at the car maker MG-Rover. Whilst the firm's eventual collapse in 2005 was a substantial shock to the West Midlands economy, the impact was much less than was anticipated when the firm was first threatened with closure in 2000 at the time of its break-up and sale by the German car firm BMW. Although the firm struggled as an independent producer, the five years of continued production until 2005 and the work of the initial Rover Task Force (RTF1), enabled many suppliers to adjust and diversify away from their hitherto dependence on MG-Rover resulting in as many as 10,000-12,000 jobs being 'saved'. This first intervention was later followed by a programme to help ex-workers to find new jobs or re-train and assist supply firms to continue trading in the short term. Examination of the effectiveness of these emergency initiatives enables a wider discussion about the nature of industrial policy in the region and the work of the local regional development agency's cluster-based approach to economic development and business support. Whilst the actions taken were successful in a number of aspects, there were a number of significant 'failures' at both national and local level. The MG-Rover case also illustrates a number of critical issues pertaining to regionally based cluster policies and the organization of cluster management groups where the 'cluster' in question not only crosses both administrative and 'sector' boundaries but is also subject to the imperatives of the global market car market. JEL classification: L52, L62, N94, R11, R58Key words: Rover Task Force, MG Rover, automotive industry, cluster policy, industrial policy, regional development agencies * The authors wish to acknowledge the support of the ESRC under award number RES-000-22-2478.

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